Canada Inflation

Canada: Inflation falls in January

February 26, 2015

In January, consumer prices fell a seasonally-adjusted 0.2% over the previous month, which matched December’s result. According to Statistics Canada, the decrease came on the back of lower prices for transportation.

Annual headline inflation fell from 1.5% in December to 1.0% in January, thus recording the lowest rate in over a year. According to Statistics Canada, the deceleration was due to lower gasoline prices. As a result, inflation is now at the lower bound of the Central Bank’s tolerance margin of plus/minus 1.0 percentage points around its target of 2.0%. Annual average inflation was stable at December’s 1.9% in January. Annual core inflation, which excludes volatile items such as gasoline and fresh food, was also stable at December’s 2.2%.

According to its January Monetary Policy Report, the Bank of Canada expects headline inflation to average 1.2% in 2015 and 2.0% in 2016. FocusEconomics Consensus Forecast panelists expect inflation to average 1.3% in 2015, which is down 0.5 percentage points from the previous month’s forecast. The panel expects inflation to average 2.1% in 2016.

The Ivey Purchasing Managers Index (PMI), prepared by the Richard Ivey School of Business, declined a seasonally-adjusted 2.6 points from November to 60.4 in December—coming in below the 62.2-point reading that market analysts had expected.